Archive · 9 Jun 2025
Indian Tax Rules for Foreign Rental Income Explained
Imagine you live in Australia and own a rental house.
If you move back to India and rent it out, the Indian government decides how to tax the money you earn.
If you've been away from India for a while, you might not pay taxes on that income.
This changes if you become a regular resident in India, then you have to pay tax on your worldwide income, including the Australian rent.
You can deduct the interest you pay on the mortgage.
Since the mortgage is on a foreign property, the interest isn't taxed, so you can safely deduct it.
Rental income from an Australian property may be taxed in India.
Taxability depends on the individual's residential status in India.
RNOR status means foreign income from assets located outside India is not taxed.
ROR status subjects global income, including rental income, to Indian taxes.
Mortgage interest on the Australian property is deductible under Indian tax law.
- Who
- An individual returning to India and planning to rent out an Australian property.
- What
- Taxation of foreign rental income in India.
- When
- Upon returning to India permanently by December 2025.
- Where
- India (taxation) and Australia (property location).
- Why
- To determine if rental income from an Australian property is taxable in India and if mortgage interest is deductible.
FEMA Guidelines and Interest Taxability
Tax Implications for Foreign Rental Income
Taxability based on Residency Status
FEMA Guidelines and Interest Taxability
If a person is RNOR in India, the rental income from Australian property is not taxable in India.
Tax Implications for Foreign Rental Income
Rental income from Australian property is taxed in India as 'Income from House Property'.
Mortgage Interest Deduction
FEMA Guidelines and Interest Taxability
Indian tax regulations allow deduction of mortgage interest as long as the interest itself is not taxable in India.
Tax Implications for Foreign Rental Income
Interest on the foreign mortgage is deductible.
- Taxable Income Type
- Income from House Property
- Taxpayer Status (Initial)
- Resident but Not Ordinarily Resident (RNOR)
- Taxpayer Status (Later)
- Resident and Ordinarily Resident (ROR)
- Mortgage
- On Australian property
- Interest Deduction
- Allowed once ROR
- Rental Income Repatriation
- Not required under FEMA